WASHINGTON - A victorious President Barack Obama told Americans he had never been more optimistic. "The best is yet to come," he said, ticking off his legislative goals of reforming the tax system, working to ease climate change and overhauling the nation's immigration laws. "Not so fast, Mr. President," came the response from Republicans, who still hold their grip on the House of Representatives.

The first test of whether the country's deep partisan divide can be narrowed comes immediately, as Democrats under Obama's leadership try to work out a compromise with Republicans to avoid what has been called the "fiscal cliff," a series of automatic tax increases and spending cuts totalling $800 billion next year alone that could push the slowly recovering U.S. economy back into recession.

The glow of victory will quickly fade despite the president's surprisingly easy win of a second term, even though he had led the country through a period in which the economy suffered its biggest downturn since the 1930s Great Depression and stubbornly high unemployment dipped only slightly below 8 per cent in the final months of the campaign.

Voters' rejection of Republican challenger Mitt Romney and his party's drift to the far right of the political spectrum will surely bring a deep reassessment of strategy. The Republican base — dominated by diminishing numbers of white men — is shrinking, while the country moves toward a day when minorities — blacks, Hispanics and Asians — become the majority. Obama's second-term victory was sealed by massive minority support.

Obama's re-election guarantees the full implementation of his signature legislative achievement, the overhaul of the nation's health care system, which Republicans had vowed to overturn. Likely, too, will be a continued U.S. foreign policy that depends on multinational partnerships in dealing with issues like Syria's civil war and Iran's nuclear program. Romney said those tactics were a sign of American weakness. And China, facing its own leadership transition, should be relieved. Romney had pledged to declare it a currency manipulator, potentially leading to sanctions and escalating trade tensions.

But before Obama faces inauguration in January comes the "fiscal cliff" at the start of 2013. It includes big tax increases for nearly all Americans and deep spending cuts, including big reductions in spending for the military and popular social programs, and it grew out of the government's inability a year ago to reach a deal on cutting America's skyrocketing budget deficit and more than $16 trillion debt. The automatic cuts and tax increases were put in place as Congress and the White House decided to push the problem beyond Tuesday's election.

As he spoke in Chicago after his victory, Obama forecast the big fight to come, saying it will "inevitably stir up passions."

"That won't change after tonight, and it shouldn't," he added. "These arguments we have are a mark of our liberty."

That puts a best face on what will be a brutal ideological fight.

Republican House speaker John Boehner reminded Americans that his party still holds the cards with their majority in the lower chamber of Congress.

He said Wednesday that he was open to raising government revenue, but said that could not be done, as Obama wants, by raising taxes on high income earners. Instead, he said, tax rates should be lowered across the board, a move that he said would stimulate economic growth while producing more tax revenue. That does not portend a compromise any time soon because it holds to Republicans' long-held contention that increased money for the government should be generated through what was termed "trickle-down economics," a concept dating back to the presidency of Ronald Reagan.

"Voters made clear there is no mandate for raising taxes. Obama has proposed higher taxes on households earning over $250,000 a year, and that is what killed attempts at compromise a year ago," Boehner said initially after Obama was named winner.

Setting up a continuing legislative gridlock, Democrats continue to hold control of the Senate and are able to trump conservative legislation that originates in the House. As leader of the Senate minority, Republican Sen. Mitch McConnell signalled a readiness at continued obstruction if the Democrats and the president don't capitulate.

"The voters have not endorsed the failures or excesses of the president's first term," said McConnell, frosty in his postelection remarks. "Now it's time for the president to propose solutions that actually have a chance of passing the Republican-controlled House and deliver in a way that he did not in his first four years in office."

As the race was called for Obama, thousands of supporters in his hometown of Chicago hugged each other, danced and pumped their fists. Excited crowds gathered in New York's Times Square and near the White House in Washington, drivers joyfully honking as they passed.

But the celebration was not the overwhelming one of four years ago, when voters knew they were making history by electing America's first black president.

It was a far cry from the Obama of four years ago, the son of a white American mother and a Kenyan father whose improbable election captivated the world with his message of hope and pledges of bipartisanship that would change the way things are done in Washington.

Those lofty ambitions quickly sank into the quagmire of the punishing economic recession.

Younger voters and minorities went to the polls Tuesday at levels not far off from the historic coalition Obama assembled in 2008. Hispanics made up 10 per cent of the electorate, up from 9 per cent four years ago. Republicans won less than 30 per cent of the Hispanic vote and not even one in 10 black voters.

While many in Republican leadership were talking tough, others in the party spoke of needing to change their approach on issues including immigration.

Republicans have a "period of reflection and recalibration ahead," Sen. John Cornyn, chairman of the National Republican Senatorial Committee, acknowledged.

But Obama's narrow lead in the popular vote will make it difficult for him to claim a sweeping mandate. With returns from 94 per cent of the nation's precincts, Obama had 58 million, or 50 per cent of the popular vote. Romney had 56 million, or 48 per cent.

Romney tried to set a more conciliatory tone on his way off the national stage.

"At a time like this, we can't risk partisan bickering," Romney said, after a campaign filled with it. "Our leaders have to reach across the aisle to do the people's work."

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